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Amit Agarwal Versus DCIT, Central Circle-XXVI I, Kolkata

2016 (11) TMI 596 - ITAT KOLKATA

Unexplained cash credit - commission income from providing accommodating entries - Held that:- We conclude that assessee has furnished his statement on oath stating that he is engaged in providing accommodating entries to various parties and for this act earned nominal amount of commission income. From the perusal of bank statement, we find that cash was deposited and immediately it was transferred to the account of the party leaving negligent amount of balance in the bank account of assessee. I .....

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e iron & steel business of the assessee, we are accordingly inclined to apply the peak credit theory to tax the undisclosed income of assessee. - Decided in favour of assessee. - ITA No. 337/Kol /2014 - Dated:- 9-9-2016 - Shri Waseem Ahmed, Accountant Member And Shri S. S. Viswanethra Ravi, Judicial Member By Appellant : Shri S.L.Kochar, Advocate & Shri Anil Kochar, Advocate By Respondent : Shri Rajat Kumar Kureel, JCIT-SR-DR ORDER Per Waseem Ahmed, Accountant Member This appeal by the asses .....

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is appeal is that Ld. CIT(A) erred in confirming the action of Assessing Officer by sustaining the addition of ₹ 1,09,50,000/- on account of unexplained cash credit. 3. Facts in brief as have been brought on record, assessee, an individual engaged in the business of iron and steel products. For the year under consideration, assessee filed its return of income declaring total income of ₹ 2,51,820/-on 28.09.2011. Thereafter the case was selected for scrutiny and accordingly, notice u/s .....

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000/- 10.03.2011 5,00,000/- 11.03.2011 9,00,000/- 12.03.2011 9,00,000/- 15.03.2011 9,00,000/- 16.03.2011 9,00,000/- 18.03.2011 7,00,000/- 21.03.2011 5,50,000/- 22.03.2011 9,00,000/- 23.03.2011 8,50,000/- 26.03.2011 9,00,000/- 29.03.2011 4,00,000/- 30.03.2011 9,50,000 Total 1,09,50,000/- Assessee was called by issuing summons u/s. 131 of the Act and accordingly statement u/s. 131 of the Act was recorded on oath wherein assessee accepted that he was engaged in providing accommodation entries in li .....

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CIT(A) whereas assessee submitted that he has issued cheques to third parties in lieu of cash so cash deposited with his bank account does not belong to him. Therefore no addition can be made. Before Ld. CIT(A) assessee also consented without prejudice to above that entire cash deposit cannot be treated as income of assessee. Before Ld. CIT(A) assessee submitted that AO should have applied the peak credit theory to arrive at the undisclosed income as there were deposit and withdrawals in the ba .....

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008466 with Bank of Baroda, M.G. Road, Kolkata. I have also considered the decisions of the jurisdictional ITAT relied upon by the appellant. On careful consideration of the facts, I am of the opinion that there is no dispute on the fact that the appellant s bank account under reference with Bank of Baroda was an undisclosed bank account. On perusal of the bank stat and nature of entries of debits and credits, it is observed that the cash was deposited by the appellant on various dates and immed .....

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of cash deposit. Thus, the appellant has failed to discharge the onus cash on him. The cash was found credited in the undisclosed bank account of the appellant and therefore the onus was on him to explain the source cash and if the same was received from the parties, even then the onus was him to disclose the identity of such parties and their creditworthiness. However, the appellant kept his silence and did not disclose and explain anything. Under the circumstances, I am of the opinion that the .....

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thdrawal at all from the said bank account. The peak credit theory is applicable in such cases where there is cash deposit and cash withdrawal and in such a situation the presumption is that the cash withdrawn was available for re-deposit in the bank account, if there is no evidence that the cash withdrawn was expended or invested. However, in the case of appellant there is no cash withdrawal at all from the undisclosed bank account and the entire money was gone away by withdrawing through chequ .....

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ecisions are distinguishable on facts because in those cases there were both cash and cheques deposited and withdrawals. However, in the case of appellant, as mentioned above, there was no cash withdrawal at all from the bank account. There was 100% deposited of cash and 100% withdrawal through cheques of equal amount. Thus, no withdrawn amount was available with the appellant to re-deposit the same in the undisclosed bank account. The ape has also not claimed that he was engaged in the business .....

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d the source of cash deposits. By keeping silence and not disclosing the correct facts, the appellant cannot avail the benefit of the peak credit theory by saying that the entire cash deposit cannot be his income. In view of above, it is held that the AO was justified in making addition of ₹ 1,09,50,000/- u/s. 68 of the Act on account of unexplained cash credits in the undisclosed bank account and that, the peak credit theory is not applicable in the case of appellant. The addition made by .....

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counting form through various parties and income of assessee out of the transaction was in the form of commission which is of negligible value. On the other hand, Ld. DR submitted that assessee engaged in the trading business of iron and steel products and in the instant case cash was deposited and withdrawn by issuing cheques to various parties so the peak credit theory cannot be applied. Had there been cash deposit and cash withdrawal then only peak credit theory should be applied. Since the m .....

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sion, we find that Authorities Below have treated the entire cash deposits with the bank account of assessee as undisclosed income on the premise that assessee failed to produce the parties to whom the cheques were issued. Authorities Below has also denied the arguments made by assessee that he was engaged in the business of accommodating entries provided to various parties. Now the question before us arise so as to whether the cash deposit in the bank account of assessee amounts to undisclosed .....

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amounting to ₹ 83,48,16,130/- in six undisclosed bank account maintained with Axis Bank Ltd. The assessee before AO filed working of peak credit in relation to cash deposits made in these six bank accounts and requested the AO to assess the peak credit amounting to ₹ 1,01,40,000/-. The assessee claimed to have computed the peak credit of these six bank accounts taking all the deposits and withdrawals. The AO while framing assessment treated the unexplained cash credit/unexplained in .....

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a, AY 2009-10 Binod Kumar Jha, AY 2009-10 In view of the above statement the assessee claimed that he is engaged in the business of providing accommodation entries to various parties on commission basis and this commission has all along been disclosed by him as business income in the returns of income particularly for AYs 2008-09, 2009-10 and 2010-11. Now before us assessee's counsel argued that even peak credit cannot be added in the hands of the assessee only finance commission earned by h .....

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tion nos. 14 and 15 that assessee is only a conduit in a big syndicate of accommodation entry providers and he has earned only commission income for providing accommodation entry. The assessee used to receive cash and deposit the same in one of these six bank accounts and issued cheque of the same amount as can be seen from the extracts of bank statements of these six bank accounts filed by assessee in its paper book. On the very date of cash deposit, cheque is issued of the similar amount. This .....

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Binod Kumar Jha, AY 2009-10 accounts in the same bank branch. This modus operandi clearly reveals that the assessee is merely an accommodation entry provider and nothing else. 6. In view of the above facts and circumstances, the Ld. Counsel for the assessee relied on the decision of Coordinate bench in the case of ITO vs. Shri Piyush Poddar in ITA No. 1050/Kol/2011 for AY 2006-07 dated 07.09.2015, wherein exactly on similar circumstances, the Tribunal has directed the AO to assess the peak cred .....

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e to tax., However, he shifted his stand by accepting the peak credit theory before the ld. CIT(A). This is evident from the fact that he had not preferred further appeal before the Tribunal against the ld. CIT(A)'s order. In accordance with the directions of the Hon'ble Calcutta High Court, we had examined the veracity of the claim of peak credit theory made by the assessee in respect of all the transactions in Central Bank of India. It is observed that the assessee had rotated his own .....

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practice of adopting the peak credit theory for the purpose of determination of undisclosed income of the assessee. Hence, reliance placed by the ld. DR in the decision of the Hon'ble Allahabad High Court reported in 276 ITR 38 which rejected the concept of peak credit theory is not applicable to the facts of the instant case. In the case before the Hon'ble Allahabad High Court, the assessee claimed that the credits in the bank account represented genuine loans borrowed and the characte .....

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vided by him for want of maintenance of books and details. This goes to prove that the genuineness of the transactions contained in the accommodation entry business as reflected in the said bank account could not be proved by the assessee. This is a distinct and crucial factor which distinguishes the decision rendered by the Hon'ble Allahabad High Court in 276 ITR 38 which was heavily relied upon by the Revenue. 11. On perusal of the bank account with Central Bank of India, we are satisfied .....

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of Mahesh Kumar Gupta in IT(SS)A. No.11/Kol/2014 dated 0.2.2005 wherein ITAT observed that the claim of the assessee was that the cheque withdrawals were for giving loan for the short period. Held as follows :- Binod Kumar Jha, AY 2009-10 "The AO cannot refuse to grant set off for the withdrawal made by cheque without bringing on record any materials so that the amount withdrawn by cheque cannot have been received back by the assessee and utilized by him in making subsequent deposits by ch .....

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and need not, automatically result in deeming the value of investment to be the income of the assessee. That is still a matter within the discretion of the officer and, therefore, of the Tribunal. In other words, the discretion has been conferred on the Income tax Officer u/s 69 of the Act to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and ci .....

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te to rest, in the interest of justice and fair play, we direct the ld. AO to assess the peak credit in this case in respect of both cash as well as cheque transaction contained in the said bank account by verifying the veracity of the figures worked out by the assesse and bring to tax the same. We draw support from the decision rendered by 'C' Bench of Kolkata ITAT in ITA No.2069/Kol/2010 for A.Y.2007-08 dated 23.03.2012 in the case of ITO vs Shri Ganga Prasad Vyas wherein it was held t .....

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We find that the assessee has maintained a bank account which is admittedly not disclosed to the revenue and there is no doubt that the deposits in this bank account represents undisclosed income of the assessee to be assessed as undisclosed income but qua only the peak amount. The assessee has filed complete statement of peak deposit and withdrawals which is at ₹ 1,87,247/- and before CIT(A). We are of the view that the CIT(A) has rightly directed the AO to restrict the addition to the e .....

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